Economy

Real estate: why it might be worthwhile to invest abroad now


Tuscany is still a popular travel destination.
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At the beginning of the year – and thus at the beginning of the corona pandemic – speculation about economic development in Germany intensified. How many companies would file for bankruptcy? Does the business curve take the shape of a V or a W? Does the pandemic mean the end of the real estate price boom because nobody dares to invest any more?

Since the end of this year at the latest, however, it has been clear that the German real estate market is not only robust, it almost looks like it has been spurred on by the pandemic. Real estate is evidently proving more than ever to be one of the last “safe havens” for private investments.

Compared to the same quarter of the previous year, prices rose by 7.8 percent in the third quarter of 2020. And not only in the Big 7 German metropolises – Berlin, Hamburg, Munich, Frankfurt, Cologne, Essen, Dortmund – but above all in the surrounding area. Since the summer of 2016, the properties in the 36 districts bordering these major cities have been more profitable than those in the major cities themselves – and therefore more attractive.

House and flat prices are rising constantly – but especially in Germany

The consulting firm Deloitte predicts in its current Property Index that attitudes towards living will continue to change due to the pandemic. Home is becoming more important, while proximity to the office is becoming less important – which also explains why the surrounding area is becoming increasingly popular.

Between 2015 and the first half of 2020 house prices in Germany rose by 36 percent. This puts the Federal Republic of Germany 17 percentage points above the EU average. It is becoming more and more expensive to buy a property in Germany; even if conditions are still favorable due to the low interest rate policy. But a look abroad could be worthwhile.

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Because in vacation countries like France, Italy or Spain it looks a little different than in Germany. Compared to the Federal Republic of Germany, the price increase is rather moderate, in Italy it is almost non-existent. If you want to buy a 140 square meter apartment in Berlin-Moabit, you can get something comparable on Lake Garda for the same amount. Not once, but three times.

The real estate portal Immowelt, which, like NewsABC.net, belongs to Axel Springer Verlag, lists an approximately 185 square meter apartment in Moabit for 1.155 million euros and a detached house with 184 square meters of residential space and 500 square meters of land on Lake Garda for 375,000 euros. The house includes a garden, a terrace, three bedrooms, two bathrooms and the possibility of installing a pool.

The economic crises of 2008 and 2020 are primarily to blame for these low prices, says Federico Fimiani, an expert on the Italian real estate market at the broker Traum-Ferienwohnungen GmbH, to NewsABC.net. Since the financial crisis twelve years ago, property prices in Italy have fallen continuously, youth unemployment has risen and the middle class has increasingly slipped into the working class. All difficult conditions for a high investment. Germany, on the other hand, was better positioned economically from the start. When the corona pandemic strengthened domestic tourism in this country, it broke away for the already weak country of Italy. In this way, the virus widened the gap between Germany and Italy.

“In Italy, the property market has hit the lowest point in the last decade,” says Fimiani. “That makes us confident that property values ​​could rise in the long term.”

It was similar in Portugal. Real estate prices there seem to have only soared since 2015. A house now costs 50 percent more than it cost five years ago – even though the general price level only increased by 0.3 percent between the end of 2018 and the end of 2019. The difference to house prices is enormous, so is the return. For Italy, Fimiani estimates an annual return of three to four percent – but this can vary depending on the location and type of property.

It might even be worthwhile to wait a little longer before buying. In Rome or Milan, the purchase prices have fallen due to the pandemic. Houses in regions that are heavily dependent on tourism could lose even more in price. And last but not least, exit restrictions have resulted in office buildings also being less and less in demand.

Find out about the location and condition of “your” property

But be careful: buying a property abroad is subject to different conditions depending on the country. Some banks require collateral if you want to take out a loan. So it could be that you already have to have a property, otherwise the bank is too risky to give you a loan. Looking for a credit institute abroad is only advisable if there are no language barriers, according to Traum-Ferienwohnungen. It is better to look longer for a suitable bank than to get involved with one that does not really suit your needs.

Do not forget that property transfer tax or property tax, or possibly renovation costs, also apply abroad. Better to visit the property again than to buy it blindly.

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